Food Trade News

Ahold Delhaize, the Zandaam, the Netherlands based retailer that operates five banners in the U.S., reported overall third quarter net sales of $20.8 billion (17.8 billion euros), up 6.8 percent, or 10.1 percent at constant exchange rates.

At Ahold Delhaize USA, which includes The Giant Company, Giant Food, Stop & Shop, Food Lion and Hannaford, comparable store sales (excluding gas) grew 12.4 percent, due largely to gains realized from the COVID-19 outbreak. Brand performance was strong across the board, led by growth at Food Lion and Giant Food. Online sales in the segment were up 114.7 percent in constant currency.

The retailer’s U.S. underlying operating margin was 5.0 percent, up 0.6 percentage points from the prior year at constant exchange rates, driven largely by operating leverage from higher sales growth due to COVID-19, offset in part by significant costs related to COVID-19.

Ahold Delhaize’s net income was $79.6 million (68 million euros), driven down 84.9 percent in the quarter due primarily to a previously announced $675.1 million (577 million euros) provision for a U.S. pension plan withdrawal, primarily affecting Stop & Shop and Giant Food. However, underlying income from continuing operations was $620.1 million (530 million euros), up 8.6 percent in the quarter.

COVID-19-related costs were approximately $549.9 million (470 million euros) year to date, and approximately $163.8 million (140 million euros) in the third quarter, including safety measures and enhanced associate pay.

The retailer’s 2020 underlying EPS outlook was raised to growth in the high-20 percent range and the company said it continues to expect free cash flow to be at least $1.99 billion (1.7 billion euros), net of a fourth quarter payment for a U.S. pension plan withdrawal, and capital expenditures of around $2.9 billion (2.5 billion euros).

President and CEO Frans Muller said: “As COVID-19 continues to impact our communities, I am increasingly proud of our teams’ performance. Their intense focus on the safety of our stores and distribution centers and their persistent efforts to provide outstanding service to our local communities are commendable.

“The operational execution by our teams remains outstanding and has continued to drive strong Q3 performance in both the U.S. and Europe. Our results reflected our ability to leverage our leading local digital and omnichannel platform, which generated nearly 115 percent net consumer online sales growth in the U.S. and nearly 50 percent growth in Europe in the quarter, at constant exchanges rates. While there remains a high level of uncertainty in the market, our strong year-to-date performance allows us to raise our 2020 underlying EPS outlook once again.

“We continue to adapt to changes we are seeing in consumer shopping patterns and behavior. Over the coming years, we will invest in our business to solidify our position as an industry-leading local omnichannel retailer and increase our share of the consumer wallet. We will find ways to improve our online productivity and are on track to achieve the 1.9 billion euros ($2.2 billion) cumulative cost savings target by 2021. To benefit all of our stakeholders, we aim to strike the appropriate balance between investing in the health and safety of associates and customers, supporting our local communities, prioritizing environmental, social, and governance (ESG) initiatives, and returning capital to shareholders.”

The retailer said it continues to solidify its position as an industry-leading local omnichannel retailer in 2021 and beyond, concentrating on growing in three main areas: online capacity, supply chain and technological capabilities.

Currently, Ahold Delhaize’s U.S. businesses reach 90 percent of households in the markets where they operate with home and delivery as well as click and collect, around 70 percent of which have access to same-day options.

In 2020 and 2021, cumulatively, the retailer plains to increase online capacity by nearly 100 percent in the U.S. and will have expanded click and collect to nearly 1,400 locations in the U.S. by 2021, doubling the number of locations since the beginning of 2020.

With regard to its U.S. supply chain, the company Ahold Delhaize had previously noted that it will be moving to a fully integrated self-distribution model by 2023, adding that it is progressing on their deliverables ahead of schedule, with the first integrated distribution center of the transformation initiative going live in 2021.

In omni channel, Ahold Delhaize said its U.S. businesses are focused on enhancing subscription offerings. Carlisle, PA based The Giant Company will test a new subscription offer in the first quarter of 2021 with an annual membership fee of less than $100, improved value proposition and preferential delivery time slots with the aim of driving increased loyalty and engagement. The Central PA retailer will be working with Mirakl, a French cloud-based ecommerce company which specializes in online marketing platforms.

U.S. businesses will offer an “endless aisle” solution with an additional 80,000-100,000 general merchandise and food items in the first half of 2021. Additionally, the value proposition will be enhanced through the launching of 1,500-2,000 more own-brand items in 2021, growing from the current base of 15,000 items.

At Quincy, MA-based Stop & Shop, ADUSA’s largest brand, its current remodeling program will be accelerated with approximately 60 additional stores in 2021, an increase from 31 stores in 2020. The retailer said the remodeled stores are performing well with sales lifts in line with expectations.

The company’s third quarter financial report also included an update on its environmental, social, and governance (ESG) call to action.

Ahold Delhaize said that its U.S. brands are enhancing their value proposition through its leading own-brand offerings with a goal of having 51 percent of these sales be from healthy products by 2022. They will also be focusing on increasing discounts and rewards on healthier products and will implement easy-to-use nutritional labeling across its portfolio by the end of 2025.

In October, the U.S. brands announced a target for at least 54 percent of own-brand food sales to be from products that achieve one, two or three stars through the Guiding Stars nutrition program by 2025.

The company also provided an update on its environmental initiatives, reporting a focus to work toward zero plastic waste from its own-brand packaging by 2025, including aiming for 25 percent of own-brand plastic packaging made from recycled materials. The company is also committed to science-based targets for 2030 to halve carbon emissions from its operations and reduce value chain emissions by 15 percent.

The retailer stressed that they embrace clear standards on human rights, such as non-discrimination and the prevention of forced and child labor. Following the publication of its inaugural Human Rights Report in June 2020, Ahold Delhaize is now strengthening governance and working with its brands to develop local roadmaps that take into consideration the six salient issues addressed in the report.

Ahold Delhaize noted that its brands aim to provide competitive associated pay based on industry practices and local market conditions and strive for 100 percent gender balanced candidate and succession slates for all leadership positions. Further, they aspire for 100 percent of associates to rate the company as inclusive.

In discussing outlook, the retailer said that COVID-19 continues to create significant uncertainty for the remainder of 2020, though. However, due to the company’s strong performance so far this year, guidance for underlying EPS is being raised to the high-20 percent range from low-to-mid-20 percent growth previously. The group will reach its $826 billion (7 billion euros) net consumer online sales goal in 2020, one year ahead of plan.

Underlying operating margin in 2020 is still expected to be higher than 2019.

The 2020 free cash flow outlook of at least $1.99 billion (1.7 billion euros) is reiterated and includes the effect of paying the majority of the previously announced $675 million (577 million euros) pre-tax obligation to withdraw from the UFCW International Union – Industry Pension Fund in Q4. The capital expenditure guidance of around $2.9 billion (2.5 billion euros) is maintained and reflects the company’s accelerated investments in digital and omnichannel capabilities. In addition, Ahold Delhaize remains committed to its dividend policy and share buyback program in 2020, as previously stated. A new $1.17 billion (1 billion euros) share buyback program has been authorized, to start at the beginning of 2021.

Reading, PA-based Redner’s Markets Inc., said it will add new staff at every location throughout its Eastern Pennsylvania, Maryland and Delaware trading area.

Like many other retailers, Redner’s has experienced new sales growth during the COVID-19 pandemic. The retailer also noted that its recently expanded “Redner’s Ready” online ordering service has contributed to revenue gains. That growth has impacted all Redner’s divisions – convenience (21 Quick Shoppes), grocery (44 Redner’s Markets) and warehouse – and will result in new employment opportunities.

“We expect to hire full and part time, cashiers, stock clerks, prepared food workers, among others, in all of our stores to enhance our service model. We are excited about the growth we are experiencing and welcome all the new additions. We look forward to offering meaningful employment and continuing our essential service to our communities,” said Robert McDonough, the regional chain’s VP-human resources.

Current benefits for Redner’s 4,800 associates include an Employee Stock Ownership Plan (ESOP), health plans, and financial incentives. The company has been conducting job fairs in select communities and are encouraging job seekers to come out and talk with a recruiter, store director, or go online at www.rednersmarkets.com to learn more about these opportunities.

In addition to the job additions at its stores, Redner’s also announced increased starting wages for workers at both of the corporate warehouse facilities. Beginning on November 1, starting wages will increase to $15/hour with a $500 signing bonus. Current and existing workers’ wages have also been adjusted.

Redner’s, which was founded by the late Earl “The Chief” Redner, is currently celebrating its 50^th anniversary.

It was a record setting year for the Wakefern Food Corporation, parent company of ShopRite, Price Rite Marketplace, Fresh Grocer, Fairway Market, Gourmet Garage and Dearborn Market. Helped by COVID-19 related sales increases and the opening of new stores, the Keasbey, NJ-based distributor reported retail sales of $18.3 billion for the 53-week fiscal year ending October 3, 2020, a 9.75 percent increase from the prior year’s retail revenue of $16.6 billion.

The announcement was made at Wakefern’s virtual annual meeting held on October 22. During the past 12 months, the largest retailer-owned cooperative in the United States opened four new ShopRite stores, welcomed a new banner, Manhattan-based Fairway Market, and added a new member, the Maniaci family and their four stores in Northern New Jersey that now trade under the Fresh Grocer banner.

Wakefern chairman and CEO Joseph S. Colalillo, president and COO Joe Sheridan, and executive VP Chris Lane addressed Wakefern shareholders, store management and staff at the 90-minute meeting.

Wakefern said that hundreds of associates from across the cooperative tuned into the annual meeting, which was broadcast live. Leadership reported on the 2020 fiscal year and how Wakefern and its family-owned supermarkets rose to every challenge and supported their communities during the unprecedented COVID-19 public health emergency. In addition to the cooperative-wide effort to keep stores stocked and running smoothly during the crisis, Wakefern members also incorporated the latest safety protocols in all stores.

“Our store associates embraced their roles. Their courage and commitment was amazing; their teamwork energizing. Throughout the last seven months, I’ve witnessed our entire organization live our purpose of caring deeply about people, helping them to eat well and be happy. It never had to be said, it’s just what we did,” said Colalillo, whose family owns five ShopRite stores in New Jersey and Pennsylvania.

Sheridan said 2020 created a new customer with new expectations that include cooking more at home and shopping more online. To accommodate this new customer, Wakefern added capacity to its online shopping offerings, including ShopRite from Home. He added that the company continues to innovate, improve and expand the digital shopping experience.

“Our customers turned to us for reassurance and for the things they wanted and needed for their families during this challenging time, and we were there for our customers, our neighbors, our friends and our families,” said Sheridan. “There have been a lot of changes to how we operate and how people shop, but our goal is always to provide the best and safest possible shopping experience for our customers. And that’s exactly what we are doing.”

Lane reported on the company’s successful initiatives and the focus the cooperative maintained even during a year of remarkable change and challenges.

Those accomplishments included the continued rollout of ShopRite’s flagship store brands, Bowl & Basket and Paperbird, and the recent expansion and rebrand of its other store brands, Wholesome Pantry and Wholesome Pantry Organic. The Wholesome Pantry brand of accessible foods, which is free from additives and artificial ingredients, was re-introduced this month with an updated look and feel, select new products, and a fresh tagline, “Food Set Free.”

Wakefern also opened its second stand-alone micro-fulfillment center, which uses advanced robotics to quickly assemble ShopRite from Home grocery orders and expands the reach and capacity of online shopping service for stores. Lane said the cooperative plans to open additional micro-fulfillment centers over the next few years.

Lane also detailed Wakefern’s plans to deliver wholesome and affordable fresh foods and meal solutions to customers. Fresh to Table, unveiled this month at three ShopRite stores, features a convenient “store-within-a-store” format that gives customers a whole new way to access fresh meal solutions and on-trend foods. The Fresh to Table experience provides a “One Stop Dinner Shop,” showcasing five ingredient chef and dietitian inspired meals that change weekly, as well as “Prep & Eat,” “Grab & Eat,” and “Heat & Eat” sections. The Fresh to Table experience also offers a digital component with the newly redesigned ShopRite Order Express app and integrated recipe shopping lists available through in-store QR codes and online, at ShopRite’s Recipe Shop available at shoprite.com.

“Step by step, we persevered and chipped away at our goals during 2020, even as we simultaneously responded to a global pandemic.  And for that, we can only thank each and every one of you,” said Lane.

Colalillo also presented this year’s “Chairman’s Award” to Doug Wille, Wakefern’s recently retired chief financial officer. Colalillo thanked Wille for his more than four decades of service to the cooperative. Neil Falcone, Wakefern’s former VP-ShopRite Financial Services (SFS) and corporate finance, has been named Wakefern’s new CFO.

Geoffrey Eickhoff, president and chief operating officer of Eickhoff’s Supermarkets (five ShopRite stores), was also welcomed as a new member of Wakefern’s board of directors during the meeting, and leadership thanked retiring board member, Vince Lo Curcio of Nutley Park ShopRite, Inc., for his 10 years of service to the board.

Wakefern shareholders re-elected to the board of directors at the meeting include: Colalillo as chairman and CEO; Sean McMenamin (two ShopRite stores); Larri Wolfson (owner of the Lincoln Park, NJ ShopRite); Dominick J. Romano (whose company, Ronetco, owns eight ShopRites); and Irv Glass (whose company, Glass Gardens, owns 11 ShopRites) were elected vice chairmen; Lawrence Inserra, Jr. (whose company owns 23 ShopRites and two Price Rites) was elected treasurer; Jeff Brown (11 ShopRites and two Fresh Grocers) was named assistant treasurer; Richard Saker (30 ShopRites and a Dearborn Market), is now secretary; and Ned Gladstein (whose company, Sunrise Supermarkets, owns two ShopRites), Nicholas Sumas (whose company, Village, owns 30 ShopRites, three Gourmet Garages and five Fairway Markets), and Shawn Ravitz (five ShopRites and a Price Rite) were elected assistant secretaries.

Sheridan was also re-elected as president and COO, and Lane was re-elected as EVP.

The infrastructure of Amazon Fresh, the Seattle-based juggernaut’s foray into the conventional food retail mode, is taking shape. In recent months, we have reported about locations in the Mid-Atlantic where Amazon Fresh will open stores. Those new units are clustered in three major metropolitan markets – Metro New York, Philadelphia and Washington, DC.

Now comes word, too, of a recently signed distribution center deal involving wholesaler SpartanNash in Severn, MD. That full-service warehouse is expected to supply Amazon Fresh units with grocery items in the Mid-Atlantic and other future locations in the Northeast. Earlier this month, Amazon and SpartanNash inked an agreement that would allow the Jeff Bezos-controlled company to acquire stock in the Grand Rapids, MI-based distributor.

In Metro New York, Amazon Fresh is expected to open stores in Woodland Park and Paramus, NJ (both former Fairway units) next year. In the Philadelphia area, Amazon Fresh will lease space for new stores expected to open next year in Bensalem, PA, Warrington, PA and a recently announced location on 5th and Spring Garden Streets in the Northern Liberties section of the city. That store is projected for a 2022 opening; the other two units should open next year. In the DC area, Amazon Fresh plans to open stores Fairfax and Franconia, VA, Chevy Chase, MD and at another recently announced site in Gaithersburg, MD. Those stores should open in 2021. All stores will range between 30,000 and 40,000 square feet and if you can judge by the big merchant’s one store that has opened in Woodland Hills, CA, the emphasis in the new Amazon Fresh units will be on perishables and technology with all sites in demographically favorable locations.

As for the distribution center lease that SpartanNash signed in Severn, MD, there’s some background to report that leads observers to believe that the new facility (which would be SpartanNash’s only non-military warehouse in the region) will be used as an Amazon Fresh dedicated depot.

In an SEC filing in early October, publicly-held SpartanNash issued a warrant allowing Amazon to acquire as much as 5.44 million common shares, which would represent about 15 percent of SpartanNash’s outstanding common shares. For its potential $96.4 million investment, SpartanNash will continue and further reinforce a relationship with Amazon that began in 2016 to help support Amazon’s then-fledgling grocery online delivery.

Ten days later, commercial real estate developer Provender Partners issued a release stating that SpartanNash has leased 365,000 square feet of distribution space in Severn, MD at one of the company’s properties. That space, formerly occupied by US Foodservice, is a full-service DC – grocery, frozen and refrigerated. Total lease consideration for the seven-year deal is $25.8 million. While there has been no acknowledgement about a grocery supply connection from either company, the linkage evidence is hard to ignore.

While continuing to seek new locations for its Amazon Fresh stores (and also for its Amazon Go convenience stores), the Seattle-based powerhouse is continuing to add more fulfillment centers of its own. A new distribution center is currently under construction in Bristol Township, PA (149,000 square feet). Also in Falls Township, PA, about six miles from Bristol Township, Amazon is expected to sign a lease for the 396,000 square foot former Rite Aid DC. Amazon also plans to build a 55,742 square foot warehouse at a former Waldbaum’s store in Carle Place, NY. That depot, which has gained Town of Hempstead approval, is expected to deliver products to Long Island consumers that are delivered from Amazon’s 855,000 square foot fulfillment center on State Island (with an additional 450,000 square feet to be added).

JOH recently announced the promotion of Laura George to vice president of human resources.

George began her career with JOH in 2013. At that time, she had many years of experience in human resources, primarily in higher education. “I was looking for new challenges and opportunities to grow,” she said. “When I submitted my resume for an HR position that described the employer as a family-run company, the description proved true. I was struck by the family feel at JOH and the longevity of the careers of the associates. JOH truly is a company that cares.” George served as the director of HR at JOH for seven years, building enhanced systems of HR infrastructure to support the employees of JOH.

Responsible for recruitment, employee relations, benefit and compensation planning, and management coaching, the department of human resources impacts each and every associate at JOH, George remains committed to strengthening HR’s role in collaborating with associates and members of the leadership team and continuing to hire amazing talent to support JOH’s growth and culture.

“Laura’s dedication to her work and our associates is representative of how JOH strives to perform as a company every day,” said John Saidnawey, chairman and CEO. “We are grateful to have her on our team. Congratulations on this well-deserved promotion.”

Maryland is one of only three states that prohibit beer sales in chain stores and one of only 10 states that prohibit wine sales in chain stores. Its archaic legislative stance on selling beer and wine has been in place for more than 80 years and was narrowed even further in 1978 when the Maryland General Assembly eliminated the previous law that allowed chain stores to apply for one beer and wine off-premise license per county.

All of this is despite the way the retail landscape has changed dramatically over the past 42 years with the addition of major chains including Wegmans, Costco, Food Lion, Harris Teeter, Whole Foods and others, all of which have successful track records of selling beer and/or wine in other states.

Maryland is also adversely impacted by the less restrictive policies of adjoining states and territories. In Virginia, food stores can sell beer and wine as is also the case in West Virginia and the District of Columbia. Even Pennsylvania, whose Draconian laws once resembled Maryland’s, has expanded beer and wine sales in supermarkets on a limited basis in recent years.

An advocacy group – Marylanders for Better Beer & Wine Laws (MBBWL) – is hoping to modernize the Old Line State’s antiquated laws governing chain store beer and wine sales in the upcoming 2021 Maryland General Assembly session.

Started in 2005, MBBWL was instrumental in overturning Maryland’s ban on direct wine shipping by bringing together retailers, in-state and out-of-state wineries, grape growers, chambers of commerce and farmers to legalize winery direct shipping in 2011. Following on that victory, MBBWL turned its attention to chain beer and wine sales.

MBBWL’s steering committee includes some heavy hitters in legislative matters and in the retail industry. They include Tom Saquella, former president of the Maryland Retailers Association (which includes the Maryland Food Council); Robert McKinney, former American Beverage Association VP; and Gerry Gunster, of 1st Tuesday Campaigns, a Washington, DC firm that orchestrated the referendum repealing Oklahoma’s ban on chain store alcohol sales.

“Getting chain stores to carry alcohol is the number one issue for our members,” said Adam Borden, president of MBBWL (whose website is www.mbbwl.org). “Our statewide polling consistently shows residents in favor of it 2:1. It’s finally time to modernize Maryland’s laws to promote greater convenience and lower prices.”

He added that 98 percent of Americans can go to a grocery store and buy beer and 85 percent can buy wine.

In 2012, MBBWL conducted an economic study that found a $100 million dollar impact with legalized chain store beer and wine sales. The organization has projected that it could be as much as a $200 million dollar impact today. The money would come from upfront licensing fees per location and repatriation of sales currently occurring in Washington, DC where chain stores can sell beer and wine. “The licensing fees have tremendous potential opportunities for a state that has already cut $413 million from its budget due to the pandemic,” commented Borden.

MBBWL is currently reaching out to chain stores to join their coalition and is also obtaining proposals from Maryland-based lobbying, public affairs and research firms. Borden thinks 2021 will be different than prior initiatives due to the pandemic.

The pandemic has also severely impacted state coffers across the U.S., and lawmakers are looking everywhere for new opportunities to shore up declining revenue. After reviewing alcohol licensing fees and values in other states, MBBWL developed a licensing formula for the law change that they estimate could significantly help balance Maryland’s budget. “This has piqued a lot of interest of state government officials and legislators whom we have already spoken to,” Borden said.

“As the largest full-service omni-channel supermarket in Maryland, we pride ourselves on our wide selection, fast, friendly service, and convenient locations with one-stop shopping. The MD Alcohol Choice Coalition’s effort to allow customers to purchase beer and wine in Maryland grocery stores would further support our desire to fulfill our customers one-stop shopping needs, while also significantly enhancing customer convenience,” stated Ira Kress, president of Giant Food, which operates 92 stores in the state.

Safeway, too, believes the time has come to legislate for change over this issue.

“As one of the largest grocers in Maryland, Safeway offers a great selection of quality products and services, proudly providing our customers with the convenience of one-stop shopping. However, due to current law, customers are unable to purchase beer and wine in Maryland grocery stores,” said Jim Perkins, president of Albertsons Mid-Atlantic division which includes approximately 60 Maryland Safeway stores, making it the second largest supermarket retailer in the state. “So the MBBWL coalition is encouraging legislators to allow stores like Safeway to offer customers the convenience of purchasing beer and wine while grocery shopping. And Safeway can’t wait to offer this added convenience to our customers’ shopping experience.”

And even local organized labor, which for years represented a roadblock to open up alcohol sales in neighboring Pennsylvania, believes that food stores should be allowed to sell beer and wine in Maryland.

“We believe this legislation will have merit. Anything that provides more living wage jobs will help those individuals those companies and the communities that they serve. I view this as a positive,” said Mark Federici, president of UFCW Local 400, the largest labor organization in Maryland.

And the winner of the Kings/Balducci’s auction is…Acme Markets. The large division of Albertsons was deemed the successful bidder in yesterday’s bankruptcy auction to sell a package of 25 Kings Food Lovers Markets and 10 Balducci’s units in New Jersey, Connecticut, New York, Maryland and Virginia. The bankruptcy auction (which was held virtually) began at 10 am with stalking horse bidder, hedge fund TLI Bedrock, affirming its $75 million bid to acquire the upscale Parsippany, NJ-based merchant. Acme then followed with a blockbuster bid of $96.4 million for 27 stores (19 Kings, 8 Balducci’s). The two other bidders, who qualified by submitting court-approved offers by October 9, and reportedly submitted bids for a much smaller batch of stores, did not counter Acme’s bid and shortly thereafter the Malvern-PA based unit (part of Albertsons’ new Mid-Atlantic division) was confirmed as the new owner of Kings and Balducci’s.

There are some contingencies to clear before the deal can be finalized. Foremost is clearance from the Federal Trade Commission which will review the deal and check for store overlaps and other issues that may be deemed anti-competitive. If you can predict the outcome of recent FTC rulings such as Kroger’s 2014 purchase of Harris Teeter and Acme’s own 76 store purchase of A&P units in PA, NJ, NY  and CT in 2015, which both resulted in no store divestitures, then Acme should be in good shape for several reasons. First, Acme has agreed to keep the current unionized store workforce in place. It can also provide the FTC with the fact that Acme, a conventional supermarket, and Parsippany, NJ-based Kings/Balducci’s, a gourmet-style merchant with smaller footprints, are differentiated. And as Kroger noted in their presentation to the FTC in 2013, the true competitive nature of any market must be viewed in its totality. That means any review should include the competitive presence of club stores, drug chains, convenience stores, dollar stores, mass merchants and even e-commerce who are selling grocery items in any given market.

“We look forward to welcoming Kings Food Markets and Balducci’s Food Lover’s Markets and the gourmet expertise they are known for into our family,” said Jim Perkins, Mid-Atlantic division president. “Our company has a history of managing small, differentiated chains that offer an elevated experience, like Andronico’s and Haggen in the Western U.S. When we leverage their team’s expertise and continue to deliver what their customers want, these stores can thrive. We are excited to add these two premium, gourmet banners to our East Coast operations, and plan to continue to operate the stores as Kings Food Market and Balducci’s Food Lover’s Market, respectively.”

One of the key incentives for Acme to enter the bidding arena in the first place was the relationship that it and Kings had with the United Food and Commercial Workers. In particular, one UFCW Local (360) whose members are part of a multi-employer pension plan that is currently about $60 million underfunded. The only two retailers that remain in that plan are Kings and Acme (other retailers who have gone out of business or sold their stores were also previously part that plan). If TLI Bedrock were to acquire Kings/Balducci’s and negotiate a new separate plan (which the hedge fun tried to do), Acme would be the only retailer supporting that pension fund with nothing to show for it.

With Acme’s successful bid it will be the only retailer in the Local 360 pension plan, but it now will potentially add 27 new stores to its portfolio, many in new demographically favorable markets that offer Acme the opportunity to highlight its fresh food prowess.

In a statement from John T. Niccollai, president of UFCW 464A, one of the five unions that represents Kings and Balducci’s clerks and meatcutters, the veteran labor leader said, “The Local union views the acceptance of Acme’s bid as a positive for our brothers and sisters from Kings.  We will be dealing with a company run by supermarket operators as opposed to investors and, further, we presently have an excellent working relationship with the Acme company executives and field supervision.”

When Acme assumes ownership of Kings/Balducci’s it will service those stores from its distribution center in Denver, PA which also recently incorporated the warehousing and logistics of sister firm Safeway/Eastern. Kings/Balducci’s has been supplied by Wakefern Food Corp. since 2014.

To review the course of events that led up to the auction, let’s begin on August 23, when Kings/Balducci’s owner KB US Holdings (part of Qatar-based GSSG Capital), filed for Chapter 11 bankruptcy protection.

At that same time, it was announced that New York private investment firm TLI Bedrock, which offered $75 million for the regional chain and was deemed best bidder, was officially granted stalking horse favorable status by the U.S. Bankruptcy Court (Southern District of New York) prior to a formal auction of the retailer’s stores.

Additionally, KB had obtained a commitment for approximately $20 million in debtor-in-possession (DIP) financing from its existing secured lender, Whitehorse Capital Management LLC.

TLI Bedrock, which had a 30-day window of exclusivity to negotiation with Kings/Balducci’s five UFCW labor unions (Locals 342, 360, 371, 1464A and 1500) that began on July 13 to to hammer out potential changes in existing labor contracts and pension funds, failed to reach agreement. TLI Bedrock termed the bargaining as an attempt to “modify a few discreet, minimal and limited” aspects of their labor agreements. The unions saw it differently especially when the hedge fun tied to create a new annuity-driven pension plan in attempt to especially separate itself from the large shortfall in its largest plan with UFCW Local 360.

Union officials told us that despite the significant shortfall in the Local 360 plan, they were wary of a new owner who was seeking more than “moderate” change. One union official also said that he was not confident that another new private equity owner without supermarket experience was capable of leading Kings and Balducci’s (prior to KB US Holdings, the retailer was controlled by new York investment firms Angelo Gordon & Co and MTN Capital). About 1,900 of the retailer’s approximately 3,000 associates are unionized.

Kings/Balducci’s challenges date back several years. And while more upscale retailers have entered Kings’ marketing area (primarily Central and Northern New Jersey) over the past 15 years (including Wegmans, Whole Foods, The Fresh Market and more upscale ShopRites, the market leader), many of Kings problems have been created by increasing debt.

In its most recent filing for the 52-week period ended July 25, 2020, sales at its then-35 stores were approximately $590 million, but the retailer posted an $8.6 million loss even during the COVID pandemic when virtually all food retailers experienced very healthy sales and earnings. However, pre-COVID sales were soft, and the huge financial obligations Kings faced prevented the upscale merchant from adequately investing in its operations. Kings debt level is currently $114.9 million.

Beginning in March 2019, Kings/Balducci’s has been working with investment advisor PJ Solomon to explore its sales options. After a prospectus was issued, PJ Solomon said it had contacted 114 potential purchasers, 67 of which signed non-disclosure agreements enabling them to receive further information

“Kings possesses wonderful locations and is very good at marketing its image,” said a senior VP for a New Jersey-based retailer that competes against Kings. “But for many years they have not been competitive on price. When Kings was the only high-end, perishables-oriented retailer in their marketing area, they dominated that niche. But new retailers who offer many of the same products and services and are larger in size have penetrated the market in recent years, and when you couple that with lack of adequate financing with several ownership groups, you can see how Kings has struggled.”

Veteran C&S Wholesale Grocers executive Bob Palmer will be returning to the largest wholesale grocer in the U.S. as the company’s new chief executive officer. Palmer replaces Mike Duffy, who became C&S’ CEO in January 2018. Duffy’s strength was viewed to be in the strategic supply chain arena, not as an operator or merchant. Palmer is known for his procurement and strong customer relations skills. He will report to chairman Rick Cohen.

Palmer retired from the Keene, NH-based wholesaler in September 2019 after a 33-year career with the privately-held distributor. He had held many positions at C&S since 1986 and most recently was EVP and chief procurement officer of the company before he stepped down 13 months ago.

“C&S has been a leader in the rapidly changing grocery industry for over 102 years. We will continue to drive innovation and adapt to the dynamic market conditions to better serve and support our customers,” said Cohen. “These unique times have required us to refocus our efforts and priorities. Bob is a highly valued leader that has led C&S through times of change with much success. His unrelenting focus on customer service and innovative go-to-market strategies have helped us win in challenging times and will undoubtedly serve us well as we transform for the future.”

C&S, which virtually invented the retail third-party logistics and warehousing model in the late 1970s, has endured some challenging times over the past 10 months. In addition to COVID-related issues which have affected the entire grocery industry, the company’s largest customer, Ahold Delhaize USA, announced last December that it would be shifting to a self-distribution model over the next three years, thereby eliminating the need for C&S to serve as the primary supplier for three of the company’s largest banners – Stop & Shop, The Giant Company and Giant Food. C&S and Ahold’s relationship dates back to 1990. That loss of business is estimated to be worth approximately $11.5 billion annually.

And earlier this month, another large C&S client, Key Food, said it will be leaving C&S late next year (after its contract expires). The Matawan, NJ retail co-operative with 318 stores, will shift its primary supply to UNFI, which is building a new distribution center near Allentown, PA that will open next year. That wholesale business is valued at about $1 billion annually.